You Deserve Compensation From Polluters

You Deserve Compensation From Polluters

For many years we have advocated a green tax shift that would happen to reduce and eliminate the cause of global warming. Every person would benefit from such a tax shift and a citizens dividend.

Here are excerpts from an article appearing in the Christian Science Monitor.

by Mark Clayton

Iowa farmer Jeff Labertew knows the price of carbon dioxide as well as he does the price of corn. A company pays him $1 per acre  about 50 cents per ton of CO2 emissions  not to till his soil. (Plowing releases CO2 trapped under the soil’s crust.)

But that’s a voluntary program. The company pays him to offset its own emissions. Now a raft of bills emerging in the US Congress wants to mandate something similar  a system where the market determines the price. One bill envisions an upper limit of $7 per ton; others would let it swing far higher. In Europe, which has wrestled far longer with impending mandatory cuts in emissions, the price has fluctuated from $30 a ton to $1.

Of all the issues now facing policymakers worried about climate change, the price of carbon emissions may be the most fiendishly difficult to solve. Set it too low and companies have little incentive to curb their emissions. Set it too high and the economy grinds to a halt.

At least a half dozen bills in Congress aim to solve the problem by letting the market decide through “cap-and-trade” systems. But those systems, where companies decide the most economical way to meet an overall cap, include widely varying details whose impact is largely unknown. How lawmakers implement the system could propel the program forward  or sink it entirely. That’s why finding the right price of carbon is key.

“You have a lot of people right now talking in broad terms about cap-and-trade or carbon tax approaches to dealing with the problem, but a lot of them haven’t gotten into details,” says Andrew Bowman, director of the Doris Duke Charitable Foundation climate-change program. This week, the foundation announced it would spend $100 million on climate change  at least a third of it on developing more robust economic theory to undergird emerging greenhouse-gas pricing policies.

The region with the most experience in setting carbon prices is, arguably, Europe. Under the mandates of the Kyoto Protocol, the European Union modeled its cap-and-trade approach on a US program for reducing sulfur dioxide. But CO2 prices have gyrated between $30 a ton and $1 a ton. Those wild shifts have undermined emissions goals there and must not be replicated in the US, economists say.

To avoid that, key economic problems must be resolved, including:

 Proper allocation of pollution allowances. In Europe nearly all of the valuable emission allowances  permits that each allow one ton of CO2 emissions  were given away to power companies. Those free permits became a windfall for the companies. And because an excess of permits were issued, market trading has seen carbon prices remain depressed or unsteady, driving only tiny gains in pollution reduction.

“If the amount of the allowances allocated for free exceeds the cost of reducing emissions, then you’ve given away a windfall gain and undermined the emissions program,” says Richard Newell, professor of energy and environmental economics at Duke University in Durham, N.C.

 Do companies need a “safety valve”? Many corporations say they need protection against dramatic spikes in carbon-emission prices. A climate bill sponsored by Sen. Jeff Bingaman includes such a safety valve. When the cost of emissions reached $7 a ton, his bill would issue more emission allowances, effectively capping their price at $7. But environmentalists argue that the provision sets the price too low and would undermine emissions goals. As an alternative, they suggest that power companies and other carbon emitters should be able to borrow from their own future years’ emissions allowances. That would allow businesses to plan long term without worrying about spikes due to weather or other factors.

Borrowing is a new feature of a climate bill by Sens. John McCain (R) of Arizona and Joseph Lieberman (I) of Connecticut, which is strongly endorsed by some environmental groups. “We’re adding borrowing to help smooth out spikes in the price of carbon emissions,” says David Doniger, policy director of the Natural Resource Defense Council in New York. “We think this makes far more sense than a safety valve approach.”

But the economic impact of this borrowing feature is not well understood, others say.

“Economists haven’t really thought in any detail about what including a borrowing mechanism really does,” says William Pizer, an economist and senior fellow at Resources for the Future, a Washington think tank. “You could end up with a bunch of emissions debtors” who never can reduce emissions enough to make up for the allowances they’ve borrowed.

 Foreign competition. Under most cap-and-trade approaches, the cap on emissions would drop over time, increasing the cost of emissions and leading to higher-priced goods and services. But what happens if other countries do not take comparable action on global warming?

For example: If Chinese-made autos arrive on US shores made with unacceptably high levels of greenhouse gases, one possible solution is a tariff. But a new idea bouncing around among economists is that companies importing such products would be required to purchase emissions allowances for them.

 Who’s the emitter? Producers of oil, gas, and coal are considered upstream sources of carbon emissions. Downstream sources include buildings, automobiles, electric utilities, and refineries to name a few. Choosing whom to regulate is a critical question that could mean billions of dollars in costs to the industries affected. Power companies are the focal point of some legislation, while most economists argue the focus should be on the entire economy to spread the cost around.

 Who gets the emissions revenue? So vast are US carbon emissions that if the value of US greenhouse-gas allowances rose to $15 per ton, revenues from their sale could bring in $100 billion annually, by some estimates. If more stringent targets were set on total emissions, allowance values could soar to hundreds of billions of dollars annually.

So how should that money get spent? Revenues could go to develop new emissions technology  or to lower income taxes, cut the federal deficit, or some other priority.

“Right now you have different legislative approaches, most of them pretty sketchy. Or [they] leave it up to agencies to figure out how allowances are handled,” Dr. Newell says. “But I think in the end Congress will have a big hand in determining how these billions are handed out.”

We are Hanno Beck, Lindy Davies, Fred Foldvary, Mike O'Mara, Jeff Smith, and assorted volunteers, all dedicated to bringing you the news and views that make a difference in our species struggle to win justice, prosperity, and eco-librium.

2 Responses to You Deserve Compensation From Polluters

We are having similar discussions in Australia. (Please see below). Basically, I believe you have to first work out who you are and what your hats are before you speak. Many of those who write, dont really seem to know.

HOW IS THE CARBON PRICE SET?

Epuron’s submission to the Inquiry into Electricity Supply in NSW (Owen Report), proposed the establishment of an internationally consistent carbon pricing scheme in NSW (Owen, 2007, p.5-6). In its sketchy discussion of emissions trading schemes, the Owen report says carbon prices (and therefore also the price of carbon permits?) are not set by government (p.5-5). It goes on to say that if the government wanted to control the price of emissions absolutely, then it could implement a carbon tax. It then states the following, which it also attributes to Perman et al (2003) in Natural Resource and Environmental Economics:

‘As government cannot set both the price and quantity of emissions, the consensus emerging is that controlling quantity, as under a cap and trade system has the highest likelihood of achieving an emission reduction target (Owen p.5-6)
.
In my view, government regulators cannot and do not control the quantity of emissions. Neither would a carbon tax control the price of emissions absolutely, as stated by Owen.

Industry and government producers of goods and services are overwhelmingly in charge of the quantity of emissions entering the environment. Government regulators can only try to provide incentives for their reduction, which may or may not work. A carbon tax or trading system encourages producers to reduce emissions, but could not control this.

In my view, it therefore seems that the regulatory arm of government should be responsible for consultatively setting the price of carbon, in a way which also provides incentives to industry and government producers to reduce their quantity of emissions, in order to meet government emissions targets, as they are progressively reduced. Competition between producers ideally drives the emissions reduction process. I think this is also the view of the Climate Change Group in the Department of Prime Minister and Cabinet. If I am correct, why does Owen not appear to share it, as outlined above?

I also refer you to the article in today’s Australian Fin. Review from The Economist, entitled ‘Coal power a burning issue’. This is also clear as mud to me. It states:

In theory, the carbon price (in Europe) and the threat of one (in the US) should dent enthusiasm for coal. But in practice many utilities are betting that the disparity in fuel prices will outweigh the cost of extra permits to pollute. At the moment permits cost pennies in Europe because governments handed out too many of them.

Although there should be more of a shortage starting next year, the futures price would have to rise from the current 22 per tonne of carbon to over 30 per tonne to prompt a significant switch away from coal over the next two years, according to Henrik Hasselknappe of Point Carbon consultancy.’ (AFR 19.11.07, p. 60)

I wonder:

1. Why was the government handing out the permits if it did not set the price and how did its activities relate to those of the market?
2. Aren’t permits an alternative to money, the supply of which is normally under government control?
3. How and why does the futures price (which I understand ideally as an insurance related concept transported into a free market setting) affect carbon price setting?
4. What does a futures price of 22 or 30 per ton of carbon actually mean?

I am only capable of understanding risk management concepts in the insurance context I learned in the WorkCover Authority and in teaching about health at Sydney Uni, which I discuss in the attached. I cannot understand the direction that the Owen Report and the Economist are coming from, as I discuss above. I think the community urgently needs to get clearer advice on this vitally important issue of how carbon is best priced. Could someone please clear this up for us? I’d be grateful for any suggestions. I don’t like the Prime Minister’s chances of saying useful stuff in Bali in the current confusing context.

–• Who gets the emissions revenue? So vast are US carbon emissions that if the value of US greenhouse-gas allowances rose to $15 per ton, revenues from their sale could bring in $100 billion annually, by some estimates. If more stringent targets were set on total emissions, allowance values could soar to hundreds of billions of dollars annually.

So how should that money get spent? Revenues could go to develop new emissions technology – or to lower income taxes, cut the federal deficit, or some other priority.–

A World Wide, Citizens and Environmental Defense Trust Fund must be set up to collect all the pollution and natural asset and resource depletion fees as well as at least a surtax on all land values, with the proceeds distributed to all persons equally or deposited into a social security payment system of some kind.

The payroll tax could immediatly be abolished as a way of funding the SS system and repaleced by revenues from the Environmental Preservation Fees.

All carbon emmisions taxes or fees could start being collected and deposited into the Social Security fund within a very short time.

Gradually over time, the LVT could be morphed into what would be called the EPF or EPT. In addition to all the fees and charges for using up or renting environmental resources, the portion of our real estate tax bill that represents the value of our land would also contribute to this same Universal Fund.

“Right now you have different legislative approaches, most of them pretty sketchy. Or [they] leave it up to agencies to figure out how allowances are handled,” Dr. Newell says. “But I think in the end Congress will have a big hand in determining how these billions are handed out.” –

You may or may not be a member of Congress but you have a civic obligation to try to influence the decision making processes of your particular Congressman.

Do not email your congressman or send a letter by USPS.

Call either the local or the Washington DC office of your Representative and ask for an appointment for a face to face meeting.

If the rich people of the earth want to pollute the planet to satisfy all their lustful desires, then let them compensate all the poor people they create as a result of their actions.

If the poor people of the earth can not have bread, at least let them have some of the cake.

Advertise here.

Arts & Letters

Geonomics is …

a way to connect the dots. Making the cyber rounds is “The Cavernous Divide” by Scott Klinger, from AlterNet (posted March 21): “As the number of billionaires in the world expands, so does the number of those in poverty.” Duh. The yawning income gap is not news. Nearly every issue of our quarterly digest carries a similar quote. Yet the connection was worked out long ago by one of America’s greatest thinkers, Henry George, who labeled his masterpiece, Progress and Poverty. Techno- and socio-advances always enrich few and impoverish many. Yet progress also pushes up location values – the geonomic insight (is Silicon Valley cheaper now or more expensive?). Instead of taxing income, sales, or buildings, society could collect those values of sites, resources, EM spectrum, and ecosystem services via fees and dues, which would lower the income ceiling, and instead of lavishing corporate welfare, pay out the recovered revenue via dividends, which would jack up the income floor. Dots connected.

the policy that the earth’s natural patterns suggests. Use the eco-system’s self-regulating feedback loops as a model. What then needs changing? Basically, the flow of money spent to own or use Earth (both sites and resources) must visit each of us. Our agent, government, exists to collect this natural rent via fees and to disburse the collected revenue via dividends. Doing this, we could forgo taxes on homes and earnings and subsidies of either the needy or the greedy. For more, see our web site, our pamphlet of the title above, or any of our other lit pieces; ask for our literature list.

an answer for Jonathan of the Green Party (Nov 7): “What does ‘share our surplus’ mean?”
Our surplus is the values that society generates synergistically. It’s the money we spend on the nature we use: on land sites, natural resources, EM spectrum, ecosystem services (assimilating pollutants). It’s also the money we pay to holders of government-granted privileges like corporate charters. We could share it by paying for the nature we use and privileges we hold to the public treasury then getting back a fair share of the recovered revenue. Used to be, owners did owe rent (“own” and “owe” used to be one word). And presently, some lucky residents do get back periodic dividends: Alaska’s oil dividend and Aspen Colorado’s housing assistance. Doing that, instead of subsidizing bads while taxing goods, is the essence of geonomics.
Jonathan: “Is local currency what you mean?”Editor: It’s not. Community currency is a good reform, but every good reform pushes up site values. That makes land an even more tempting object of speculation. Now, any good will eventually do bad by widening the income gap – until you share land values.

an answer to a rarely asked question. If price is a reward for production, why do we pay for land, never produced by any of us? What is land price a reward for? Good behavior? How much money do we spend on the nature we use? Who gets it? What do they do with it? (If you answer all these correctly, you’re not a genius but a geoist.) The worth of Earth is enough that were we to collect and share it, we could abolish taxes on the goods we do produce. For example, San Francisco’s Redefining Progress has calculated that Cali-fornia could abolish all state and local taxes were it to collect the values of resources and of using na-ture as a dump. By exorcising the profit motive from depletion and pollution, rent collection could replace bossy regulation. Economies could self-regulate, as the rest of the eco-system does. See how big problems yield to big answers when we ask the right questions?

close to the policy of the Garden Cities in England. Founded by Ebenezer Howard over a century ago, residents own the land in common and run the town as a business. Letchworth, the oldest of the model towns, serves residents grandly from bucketfuls of collected land rent (as does the Canadian Province of Alberta from oil royalty). A geonomic town would pay the rent to residents, letting them freely choose personalized services, and also ax taxes. Both geonomics and Howard were inspired by American proto-geonomist Henry George. The movement launched by Howard today in the UK advances the shift of taxes from buildings to locations. A recent report from the Town and Country Planning Association proposes this Property Tax Shift and their journal published research in the potential of land value taxation by Tony Vickers (Vol. 69, Part 5, 2000). (Thanks to James Robertson)

a neologism for sharing “rent” or “social surplus” – the money we spend on the nature we use. When we buy land, such as the land beneath a home, we typically pay the wrong person – the homeowner. Instead, since land cost us nothing to make and is the common heritage of us all, rather than pay the owner, we should pay ourselves, our neighbors, our community. That is, we should all pay land dues to the public treasury, then our government would pay us land dividends from this collected revenue. It’s similar to the Alaska oil dividend, almost $2,000 last year. Indeed, the annual rental value of land, oil, all other natural resources, including the broadcast spectrum and other government-granted permits such as corporate charters, totals several trillion dollars each year. It’s so much that some could be spent on basic social services, the rest parceled out as a dividend, as Tom Paine suggested, and taxes (except any on natural rents) could be abolished, as Thomas Jefferson suggested. Were we sharing Earth by sharing her worth, territorial disputes would be fewer, less intense, and more resolvable.

an alternative to conventional land trusts. Just as it seems some functions should not be left to the market – private courts and cops invite corruption (while private mediation is fine) – just so some land should not be left in the market. That said, sacred sites do not make much of a model for treating the vast acreage of land that we need to use. So the usual trust model, which is anti-use and counter-market, can not apply where it’s needed most. Trust proponents worry about ownership and control – two very human ambitions – but they’re not central. Supposedly, we the people own millions acres – acres that private corporations treat as private fiefdoms – and conversely, the Nature Conservancy owns wilderness the public can some places use as parks. So, the issue is not who owns but who gets the rent – ideally, all of us.

not exactly Georgism, the Single Tax on land value proposed by Henry George. He did, tho’, inspire most of the real-world implementations of the land tax that some jurisdictions enjoy today, and modern thinkers to craft geonomics. While his name and our remedy both begin with “geo” since both words refer to “Earth”, the two have their differences. (a) George pegs land monopoly as the fundamental flaw while geonomics faults Rent retention. (b) To fix the flaw, George was content to use a tax, while geonomics jettisons them in favor of price-like fees. (c) George focused on the taking while geonomics headlines the sharing. George envisioned an enlightened state judiciously spending the collected Rent while geonomics would turn the lion’s share over to the citizens via a dividend. (d) And George, as was everyone in his era, was pro-growth while geonomics sees economies as alive, growing, maturing, and stabilizing. Despite these differences, George should be recognized as great an economist as Euclid was a geometrician.

an economic policy based on the earth’s natural patterns. Eco-systems self-regulate by using feedback loops to keep balance. Can economies do likewise? Why don’t they now produce efficiently and distribute fairly? The answers lie in the money we spend on the earth we use. To attain people/planet harmony, that financial flow from sites and resources must visit each of us. Our agent, government, must collect this natural rent via fees and disburse the collected revenue via dividends. And, it must forgo taxes on homes and earnings, and quit subsidies of either the needy or the greedy. As our steward, government must also collect Ecology Security Deposits, require Restoration Insurance, and auction off the occasional Emissions Permit. And that’s about it – were nature our model.

a way to have everybody pulling on the same end of the rope. Last summer’s expansive forest fires shed light on growing class resentment in the West. Old log-gers and ranchers rankled at the new urgency to stamp out the blazes that threatened the recent Aspenesque settlers. The newcomers expected working class firemen to make protecting their expensive homes top priority. (Chr Sci Mntr, Spt 7) The tinder for this envy? Rich people moving in bid up the price of land, making it hard to afford by people on the margin. The fault really lies with our system of privatizing land value. If this rising value were collected by land dues and shared by rent dividends – the essence of geonomic policy – who’d complain? The more people move in, the higher the land value, and the fatter the dividend paid to residents. Then people on the margin might go out of their way to invite rich outsiders in.

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Thoughts for the Day

Believe in yourself! Have faith in your abilities! Without a humble but reasonable confidence in your own powers you cannot be successful or happy.

Norman Vincent Peale

Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other.

Oscar Ameringer

The great man is he who does not lose his child’s-heart.

Mencius

When your work speaks for itself, don’t interrupt.

Henry J. Kaiser

It gets late early out there.

Yogi Berra

Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much higher consideration.

Abraham Lincoln

Curiosity is one of the permanent and certain characteristics of a vigorous mind.

Samuel Johnson

I am not a full devotee of Henry George but there is no one in the social world that I read with more intense interest.

John Kenneth Galbraith, Letter of October 30, 1998

What we have to do is to be forever curiously testing new opinions and courting new impressions.

Walter Pater

When the people fear the government, there is tyranny. When the government fears the people, there is liberty.